On February 5, 2015, the Small Business Administration (SBA) issued a new proposed rule that would establish a Government-wide mentor-protégé program for all small businesses.

Under the current framework, entities that enter into joint venture agreements to perform federal contracts are, in most instances, considered “affiliates.” In determining a company’s eligibility to compete for set-aside procurements, the SBA combines the offeror’s size with the size of its affiliated entities. Thus, an otherwise eligible small business may be deemed large due to its affiliation with another entity.

An exception to this general rule exists for participants in the SBA’s 8(a) mentor-protégé program. Under the 8(a) mentor-protégé program, an 8(a) protégé can joint venture with an approved large business mentor without being deemed affiliated.

The SBA’s proposed rule seeks to extend the mentor-protégé program to all small businesses. The intent is to create parallel program for non-8(a) small businesses, including participants in the HUBZone, Women-Owned Small Business, and Service-Disabled Veteran Owned Small Business programs, that is identical to the 8(a) mentor-protégé program. Under the proposed rule, any small business would be able to enter into an SBA approved mentor-protégé relationship and joint venture with its approved mentor without being considered affiliated.

Expanded Protégé Definition

Note that the proposed rule would allow more businesses to qualify as protégés under both the 8(a) mentor-protégé program and the proposed small business mentor-protégé program. Currently, in order to qualify as a protégé under the current 8(a) mentor-protégé program, an 8(a) contractor must (1) have a size that is less than half the size standard corresponding to its primary NAICS code; (2) be in the developmental stage of its 8(a) program participation; or (3) have not received an 8(a) contract.

The proposed rule provides that any firm that qualifies as a small business for the size standard corresponding to its primary NAICS code would qualify as a protégé under either the small business mentor-protégé program or the 8(a) mentor protégé program. SBA proposes to remove the requirement that the small business protégé have a size less than half the size standard corresponding to its primary NAICS code.

Ownership Interest

Similar to the 8(a) mentor-protégé program, the proposed rule provides that a mentor may own an equity interest of up to 40% in the protégé. This could be a significant opportunity for small businesses that are looking to increase working capital.

If finalized in the current form, the proposed rule would create significant opportunities for the participants in the new mentor-protégé program, but could place those small contractors that do not participate at a competitive disadvantage. Contractors who are interested in participating should begin evaluating potential partners and even structuring their agreements. The SBA has recognized that once the proposed rule is finalized, the number of firms seeking SBA approval of their mentor protégé agreements may become “unwieldy.” SBA states that it may institute certain open and closed periods for receipt of mentor-protégé applications. SBA would only accept mentor-protégé applications in open periods. Contractors should be prepared to submit their applications as soon as possible to avoid missing the first open period.

Comments on the proposed rule are due on April 6, 2015. Send your comments prior to April 6 to Federal Allies Institute Comments@FederalAllies.org 571-217-0823.

On July 31, 2014, President Obama signed the Fair Pay and Safe Workplaces Executive Order (Order), which imposes new requirements and prohibitions on federal contractors. While the Order is effective immediately, the requirements will not apply to contractors until the final rule implementing the Order is published (likely in 2016). In the meantime, contractors should bolster their compliance efforts to ensure they will be found responsible for future proposals.

Disclosure Requirements
Pre award: Under the Order, offerors on procurement contracts, where the estimated value exceeds $500,000, will be required to disclose certain labor law violations occurring during the prior three years. The Order enumerates 14 applicable federal labor laws and includes their state law equivalents as well.

Upon disclosing such violations, federal contractors will be permitted to explain their efforts to correct the violations and increase compliance efforts.

Contracting officers, in consultation with the agency’s designated Labor Compliance Advisor, must consider violations as well as contractors’ remedial efforts in determining whether contractors have a satisfactory record of integrity and business ethics sufficient to be considered responsible offerors.
Only serious, repeated, willful, or pervasive violations of the labor laws enumerated in the Order will demonstrate lack of integrity and business ethics. In most cases a single violation should not give rise to a non-responsibility determination.

Post award: In addition to disclosing labor law violations prior to award, federal contractors will be required to update their disclosures every 6 months. If a new violation is disclosed, the contracting officer, in consultation with the agency’s Labor Compliance Advisor, may: (1) require an agreement outlining appropriate remedial measures; (2) provide compliance assistance; (3) decide not to exercise an option on the contract; (4) terminate the contract; or (5) refer the contractor to a suspending and debarring official.

Subcontract Agreements
Federal contractors should also be aware that they will be responsible for flowing down similar requirements to their subcontractors. For subcontracts where the estimated value exceeds $500,000 (excluding commercially off-the-shelf items), contractors will need to require subcontractors to disclose any violations of the enumerated labor laws within the preceding three years and to update those disclosures every six months.

Arbitration Agreements
The Order prohibits contractors with federal contracts in excess of $1 million from entering into pre-dispute arbitration agreements with employees relating to Title VII or sexual assault or harassment torts. Contractors will be required to flow down similar requirements in subcontracts greater than $1 million. This provision, however, will not apply where employees or independent contractors entered into a valid agreement to arbitrate prior to the contractor or subcontractor bidding on a contract that is covered by the Order.

The Fair Play and Safe Workplaces Executive Order sets forth yet further requirements with which federal contractors will need to comply. Contractors should focus on increasing their compliance efforts now to ensure that the disclosure of any labor law violations in the future are minimal and not grounds for a nonresponsibility determination.

Calvin Jenkins, Dean Koppel and LeAnn Delaney are all retiring this month with Judith Roussel and Darryl Hairston having left last spring. Remaining SES level staff: John Shoraka, SBA’s Associate Administrator of Government Contracting and Business Development responsible for overseeing the umbrella office with jurisdiction over the Agency’s offices of Size Standards, HUBZone, Government Contracting, and Business Development/8(a); and Ken Dodds, Director of SBA’s Office of Government Contracting, responsible for SBA programs and policies including goaling, size standards, size protests, procurement center representatives, subcontracting, certificate of competency, and the women-owned and service-disabled veteran-owned small business programs.

If properly implemented, the Mentor Protégé proposed regulation could significantly expand the number of small businesses actively competing for government contracts.

Following the latest U.S. House Committee on Small Business, Subcommittee on Contracting and Workforce hearing entitled “Action Delayed, Small Business Opportunities Denied: Implementation of Contracting Reforms in the FY 2013 NDAA”, the Mentor Protégé proposed regulation is now with Office of Management and Budget for intra-agency comments. Once U.S. Small Business Administration receives comments from the other agencies, SBA will revise the proposed regulations as needed. Proposed regulation will then be released for public comments within the next 120 days.

“In the near future, SBA will publish a rule to implement a new Government-wide mentor-protégé program. The mentor-protégé program will be for all small business concerns, including socio-economic subcategories of small businesses, consistent with SBA’s mentor-protégé program for participants in SBA’s 8(a) Business Development Program,” said Associate Administrator John Shoraka for Office of Government Contracting and Business Development, U.S. Small Business Administration.

Continuing Resolution and the Lame Duck Session

In a morning small business briefing on September 17 prior to the convening of his afternoon hearing in the House Budget meeting room, Congressman Paul Ryan spoke of his committee’s agenda namely the CR to extend to December the previous two-year agreement achieved with Sen. Patty Murray (See Federal Allies News December 2013) that took the sequester off discretionary spending that hit particularly hard the Pentagon and NIH and many other areas important to Federal Allies Institute members. This will take us to December 11 when the rest of the FY bill is to be finalized. So for at least the near future “the fiscal trains” will run on time, plus following two days debate “fiscal plumbing to prosecute ISIS” is moving forward. Next will be the elections, followed by a lame duck session, which will take on tax extenders for expiring tax provisions from last year, revenue targets, score keepers that will better reflect reality as econometrics have come a long way. By March 2015 expect the Highway Trust Fund to be reauthorized. More priorities: the “doc fix”, Medicare, Debt Limit and Trade issues. The issue that both the Obama Administration and House agree closely upon: trade and making US businesses competitive overseas. Eximbank is extended until June and a goal is to enable more small businesses, not just the well-connected, to take advantage of Eximbank programs.

FAI Corporate Ethics Certification

At coffee at the Russell Senate Office Building with Virginia’s very collaborative senate team Senators Mark Warner and Tim Kaine, I provided an update on Federal Allies Institute’s new Corporate Ethics Certification program, just prior to Senator Kaine’s meeting on ISIL with Secretary of Defense Chuck Hagel and General Martin Dempsey, the Chairman of the Joint Chiefs of Staff. The next FAI Ethics Board of Overseers meeting is to be held at George Mason University School of Policy, Government and International Affairs in October.

Federal Allies Institute first invited the Fort Meade Regional Growth Base Business Initiative (BBI) to participate at one of our small business conferences held at Fort Myer, Virginia in 2009 and since FAI has partnered with Fort Meade BBI involving them in several other FAI national conferences. We recently welcomed the invitation by new Base Business Initiative Director Kellyann Few to announce the Federal Allies Corporate Ethics Certification Program before 125 small businesses. FAI’s CEC program is an opportunity for small businesses to earn certificates presented by the FAI Ethics Board of Overseers chaired by Gary Shumaker, President & CEO, C2 Solutions Group of Reston, Virginia.

A new FAI relationship is underway with the Foundation for Innovation and Discovery, FINND. The foundation nurtures a community of interest around innovation, sparks conversation between technologists, and educates decision-makers and promotes an environment of non-proprietary collaboration and transparency in the discovery of innovative solutions. FAI is a FINNDER discovery engine participant for Foundation for Innovation & Discovery. FAI Board member Gabriel Fulton PMP, Founder & CEO, Sintel Group, Inc., Columbia, Maryland chairs the FAI-FINND relationship.

Of the many deserving award recipients at MBDA 2014 National MED Week Conference, Federal Allies Institute members were present to support this year’s Distinguished Supplier Diversity Award winner Diane G. Dempsey, Director, Socio-Economic Business Programs, BAE Systems Intelligence & Security. Dempsey, an integral early supporter of the Federal Allies Institute, is an individual at BAE Systems I&S whose business practices have had a significant impact on the growth and development of minority-owned firms. Dempsey’s career spans over 30 years in the procurement, subcontracts and supplier diversity fields. She’s become a leader in supplier diversity through her dedication and commitment to supporting organizations that advocate diverse suppliers, and serves as an instrument in bridging the existing gaps in industry related to small business utilization.

The FAI Oklahoma Chapter was invited to participate at Oklahoma MED Week iGNITE! Conference & Awards Dinner honoring outstanding minority entrepreneurs held in Tulsa and organized by James Ray, Project Director, MBDA Center – Native American and Alaska Native Program and REI Oklahoma staff and leadership. Keynote speaker was one of the nation’s top business thought leaders Dr. Leonard Greenhalgh, professor of management at the Tuck School of Business at Dartmouth.

With a growing number of members of the FAI Board of Directors located in Texas, the FAI Texas Chapter held several meetings during August to expand and grow the chapter’s grassroots organization within the state. Among the participants the Grand Prairie Chamber of Commerce 2015 Chairman of the Board Herb Rolph and President Lynn McGinley; and Loletha Moore, Interim Director, The Best Southwest SBDC in Cedar Hill.

Federal Allies Institute University Outreach Program has made new inroads now interacting with American University, University of Maryland, The George Washington University and George Mason University.
We welcome new members and participants. If you would like to take part in any of the above activities, please call (571) 217-0823.

HHS & Federal Allies Institute have worked together since FAI’s first national conference at Fort Myer, Virginia and the Therapeutic Discovery Project Tax Credit symposium that Federal Allies was asked to organize by U.S. SBA, with Treasury, HHS and FDA. That conference yielded small bioscience research firms of 250 or fewer staff with millions of dollars to hire new researchers and to keep U.S. research from going offshore.

President Obama’s nominee for Health and Human Services Secretary Sylvia Burwell testifies at her confirmation hearing this morning. On behalf of Federal Allies Institute, I wish Sylvia Burwell and the ability and experience she brings to office, best wishes.

In 2005 I was thrust into the world of disaster response in Alabama as an entry level FEMA “Disaster Assistance Employee HQ” from Washington, D.C. there to help about 114,000 in the first 90 days – many were sudden, new residents of Alabama moving out from harm’s way. Many former residents of New Orleans and other coastal areas from Louisiana to Florida simply drove their cars north until they ran out of gas and the gas stations did likewise. At which point they called the FEMA 800 number for help.

Alabama’s disaster headquarters, Joint Field Office, in Montgomery, Alabama was an old Sam’s Club building leased by GSA and converted to office space and filled blue partitioned offices.

During my first week, with vaccinations and on-the-job training, I rose through the ranks of Individual Assistance to work directly for FEMA’s top Coordinating Federal Officer of Alabama and the top Alabama State Coordinating Officer to organize massive public events of resources and evacuees across the state.

Most were planned and implemented within 48-hour notice and as I worked with all the FEMA components, community and church groups, and corporate America, one that stood out was FEMA Logistics. Staffed with can-do spirit and drive, I thought to myself these guys are straight out of the helicopter boat scene in Francis Ford Coppola’s Apocalypse Now. No logistics problem was too big or had a too brief of a time span attached. Thousands of families, massive tents, tables, chairs, psychologists, generators, water, fuel, federal security, computers, disaster recovery centers, housing, blue tarps atop of houses everywhere, people that needed immediate assistance, people too proud to accept assistance, and the list could go on for many pages. At the end, trained in many Disaster courses, I spent my first day at a Disaster Recovery Center as the manager. Besides learning all about disasters, with even more training at Fort McClellan, my experiences with Katrina, engrained in my mind the value of companies coming to the rescue, for example, particularly Walmart with its massive distribution channels and low-key generosity. I don’t ever remember Walmart being acknowledged for all they did.

As my responsibilities grew, I gained many experiences working with a vast network of new colleagues throughout Alabama, Texas, Louisiana, Mississippi, Florida and Congressional Relations and with FEMA headquarters, such as with FEMA Legal in negotiating housing agreements between FEMA, Department of Agriculture, and Veterans Administration. Upon return to Washington, DC I took part in federal policy meetings and hearings on how to improve the multi-agency response to such a national disaster as Hurricane Katrina. I brought my best ideas.

That brings us to our next Federal Allies Summit at Hogan Lovells, Disaster Response Summit, April 17, 2014. On behalf of Federal Allies Institute, we hope you will come to Washington, D.C. and attend. It will tell you what you need to know. Register online at FederalAllies.org. Members receive a special rate.